Ogi Kavazovic, Vice President of Strategy and Marketing for OPOWER, discusses how OPOWER’s new marketplace will enhance a utility’s customer service.
|Ben Lack:||Why did OPOWER decide to build a marketplace?|
|Ogi Kavazovic:||It’s very much in keeping with the mission of our company, which is to really help people on a very large scale to bring energy efficiency and better energy management into their lives. And we’ve started with information based on behavior-based energy efficiency, which is giving data to people to help make them aware and educate them about just how many opportunities they have to eliminate wasted energy inside their homes. So things like leaving their lights on and using cold water or hot water to wash their clothes, we’ve helped them seize on those opportunities.But what’s really even a more exciting level that we’re now getting into is trying to drum up real spontaneous consumer demand for energy efficient products. And if you look at the data over the last few decades, this problem has plagued people who have been on the forefront of energy efficiency for years. Ever since it has been identified with the problem, which is, how do we get regular everyday people to care more about making energy efficient purchases? Traditional utilities have been on the forefront of this. It’s been mandated by state regulation. Utilities have been the ones pushing energy efficiency rebates and programs and so on. If you look at energy utility filings across the U.S., and they’re all public, and look at the customer participation rate in any one of these programs on average, in any given year, 100% of their customers get some kind of a mailing about bills. We’ve all seen them in our utility bills: some energy efficiency rebate that you’re able to take advantage of. About 1% of them, more or less, take advantage of this in any given year. And it’s shockingly low. And if you do a poll and ask people, in contrast to that, do you care about energy efficiency; do you care about saving money; do you care about the planet; any of these things, consistently in the 90% range, people we poll will say absolutely I care. Absolutely I would like to have saved money on my bill. And yet only 1% have actually been interested to take any step of action in that direction. So there’s this huge gap between intent and action in the energy efficiency space that’s been puzzling people trying to change that for many years.We believe there’s a very clear and simple explanation for this. The explanation is that the lack of specific and household specific data available to customers. So in general, I probably could do a little better in my home. But, I’m probably okay. I don’t let my hot water run and leave the house. I don’t do anything crazy. And so I don’t really know, and I don’t really feel compelled to act. But when you tell the consumers specifically, now here’s what’s going on in your house: You use 30% more on air conditioning than what most people that live in basically the same size as yours in your neighborhood experiencing the same weather and economic condition and similar income level do. Then you start realizing; “Oh wow, something is maybe wrong, I do something weird.” And so what we’ve seen, and one of the things that we realized is that a household specific energy data can be the catalyst to spontaneous consumer demand for an energy efficiency product. And now, the other issue is that energy data in itself is a low interest category, meaning if you give it to people they’ll probably pay attention and appreciate it. But very, very few people are actually going to be proactive and go look for it. And so we’ve seen people like Microsoft and Google put up websites where they make energy data available to people. Nobody goes to them which is why they folded their operation. We’ve seen it in home display manufacturers who sell products that consumers can buy and install in their house so they can have energy data. Nobody bought them. People folded that.The trick is how do you get energy data in front of customers without them actual taking the initiative? Because if you do, that will actually start driving them to buy other products.We think the solution is essentially what we do as a company which is work with utilities to proactively send energy data to their customers. Utilities play a crucial role in this equation because they’re able to proactively send information to customers on a regular basis. And what we think is going to happen in return is customers will get more aware, more educated, more engaged and over time their demand for energy efficient products will actually start going up. And we’re actually seeing that already. We’re now operating at a scale large enough where we have data to prove it. We have about 11 million homes we’re now in across the U.S. And we see that wherever we send home energy reports, we see spontaneous consumer demand for energy efficient products that we don’t even market.
They just happen to be available in that service territory, go up by as much as 80%, almost double. And we think with increasing measures, we can drive the number even higher. So that takes us to Marketplace. The Marketplace is those new measures that we think we can put into place. So, now that we are communicating with customers we can match, not only tell them what’s happening in their homes to give them that house specific data, we can match that with specific offers either their utility is rebating or a local retailer or manufacturer is given a discount on and really complete the equation. So going back to the AC example, if we find that the customer is using 30% more in AC than what most of their peers or neighbors do, we pair that report with a discount at Home Depot that would allow them to buy potentially new air conditioning or a window installation service at a discount. And the other key mechanism that’s part of that is if there’s a rebate involved, instead of them filling out some forms and waiting potentially weeks to get it back, we’ve done the heavy listing for them and they can just take an individually bar-coded coupon to Home Depot now and get the rebate right at the point of sale. So we think that would really lubricate the process and really drive consumer demand.
|Ben Lack:||OPOWER generates its money through you licensing your technology to utilities. Is this platform, a value-added service for the utility or are you also generating revenue in the partners that you established into the marketplace?|
|Ogi Kavazovic:||The short answer is this is a service we provide to utilities. Actually that’s the only answer, I would say. There are for two reasons a utility is very interested in this. One, to try, for those that are interested in increasing their energy savings, this actually has an impact on the energy savings as well. The more customers take steps to retrofit their house and buy more energy efficiency products that will eventually show up in the energy savings that we measure we have the utilities. And the other side of that coin is utilities spend a lot of time and money and effort administrating and marketing their rebates and trying to get a certain number of them out the door. This service makes that a whole lot easier, we think, and more effective. So we can take care of a lot of those things for them when we have the utilities. And we believe that every marketing and administrative dollar spent on rebates will go a lot further because of better targeting based on energy profile information on customers and also because of higher yield rates because of the individually barred coupons which give customers point-of-sale cash back which we expect to have a positive impact on marketing rebates.|
|Ben Lack:||How do you figure out that one person is using, in this scenario, 30% more on their air conditioning that are alike you know alike home or alike user?|
|Ogi Kavazovic:||Without getting into too much technical detail, this is essentially what OPOWERis all about. We have invested almost 5 years now and 40 more million dollars in R&D. In large part on an analytic sense, there are lots of patents behind that as well.What we’re essentially able to do is look at energy consumption patterns on the granularity that is available whether it’s monthly, daily or hourly. We run statistical regression models against weather patterns and try to figure out what part of your overall usage comes from air conditioning.So for example: If you look at a household’s usage over time, every time the weather jumps up from 60 to 80 degrees, because it gets really hot that day, every time there’s a heat spike, their energy usage goes up by a certain amount. Now, you don’t know exactly what happened inside the household. It could be in theory that every time it’s hot, people in that house turn on all their TVs and all their lights. Or it could be their air conditioning. And that difference, the Delta can be contributed to air conditioning.
Now, with just one day it could be the lights. But if you see this over and over and over again for many, many days, and we have sort of two years worth of data for most of our customers, then you start getting to a point where you have very high statistical confidence that the extra usage is coming from an air conditioner. And you can start sieving that out and talk already how much they actually spend on AC and then take it from there.
|Ben Lack:||So what’s next for OPOWER? What can we expect from the company in 2012?|
|Ogi Kavazovic:||Great question! So what you’re seeing is pieces of a broader puzzle that we’ve been working on for 18 months now since our last platform back in 2010. We would like to become the gold standard customer engagement platform for the utility industry. What we’re calling the new normal for the utility industry, a new set of customer tools and a new level of customer service that every utility should provide to their customers. The pieces that we are now so far are part of that vision.The social application that we announced in partnership with Facebook back in September is part of it. There’s also devise management and our partnership with thermostat partners we announced back in September; the rebate marketing and energy efficiency product marketing that we just announced. We’ll have other pieces that we’re going to unveil over time. But we’re going to bring it all together, I think May of this year. We’re going to announce our new platform which will show how all these channels seamlessly work together for the customer.It is our hope that the utility industry will see this as something that they should just provide as a matter of course, as a new normal to all of their customers. And that has really been what we’ve been trying to do all along, which is to help utilities change the way they interact with their customers. And the reason we want to do that is because we get tremendous benefits from doing that, including energy savings, but there are also benefits in customer satisfaction. And we want to build a piece of software infrastructure, a platform that sits on top of the billing system, on top of the CRM system, that is essentially a customer engagement platform designed from the ground of a utility industry and that every utility should deploy for a variety of reasons.
Some will deploy it to really push forward on their energy efficiency goals. Others will deploy it because they just want to be on the cutting edge for the type of customer service they want to provide. If they’re a competitive retailer, they want to deploy because they want to retain their customers or acquire new ones. Others will see opportunities to use the same platform to really drive up engagement and start cross selling other products and services and get additional revenues from there. And some companies will do it for all of those reasons simultaneously. I think our platform lends itself to all of these.
It’s helping the utility industry get into the next phase, which is what’s happening right now. They’re really evolving from energy providers to energy service providers and helping customers better manage energy. That includes engaging them, that includes having an ongoing conversation with them about their energy use and energy needs and really take advantage of their position in the utility ecosystem, which is the entity they have, the customer data and the customer relationships they have. And I think they can all become really exciting businesses if they take advantage of this. And what they need is that really sophisticated piece of software infrastructure to enable them to do that and we would like to provide that for them.